School and Community Foundation Collaboration

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School and Community Foundation Collaboration

• A Presentation for the
• 2006 Iowa Community Philanthropy Academy
• By
• Willard L. Boyd III
• NYEMASTER, GOODE, WEST, HANSELL O'BRIEN, P.C.
• 700 Walnut, Suite 1600
• Des Moines, Iowa 50309
• Telephone [phone]
• Facsimile 515-283-8018
• wlb_at_nyemaster.com

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Applicable Laws

• State Nonprofit Laws
• Revised Iowa Nonprofit Corporation Act (RINCA)
  Iowa Code Chapter 504
• Uniform Management of Institutional Funds Act
  (UMIFA) Iowa Code Chapter 540A
• Other State Laws
• Iowa Code section 279.42 Gifts to Schools
• Funds to be deposited in trust and agency fund
• Iowa Code section 298A.13 Trust or Agency Funds
• Iowa Code section 359.29 Gifts to Civil
  Townships
• Iowa Code section 565.6 Gifts to Governmental
  Entities

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Applicable Laws (contd)

• Federal Tax Laws
• IRC 501(c)(3)
• Support Organizations
• Affiliation Status
• Unrelated Business Income Tax

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Community Foundations

• Community Foundation may be set up as nonprofit
  corporation or charitable trust
• Most foundations set up as nonprofit corporations
• Not deemed a private foundation but instead a
  public charity
• 501(c)(3) Tax-Exempt Status

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Community Foundations (contd.)

• Tax-exempt, autonomous, publicly supported,
  nonsectarian philanthropic institution
• Long term goal of building permanent, named
  component funds established by many separate
  donors for the broad-based charitable benefit of
  the residents of a defined geographic location

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Community Foundations (contd.)

• Purposes
• RINCA provides that a nonprofit has the purpose
  of engaging in any lawful activity unless a more
  limited purpose is set forth in the articles of
  incorporation
• Most nonprofits generally describe their purposes
  in their articles of incorporation
• Receiving, using, managing or administering
  gifts, grants, bequests
• Making distributions

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Community Foundations (contd.)

• Powers Under RINCA include
• Same powers as an individual to do all things
  necessary and convenient to carry out activities
  of organization
• RINCA specifically provides that nonprofit may be
  a promoter, partner, member, associate, or
  manager of any partnership, joint venture, trust,
  or other entity

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Community Foundations (contd.)

• Ability to Contract with Other Nonprofits
  (Incorporated or Not Incorporated)
• Endow Iowa Iowa Code section 15.301, et seq.
• County Endowment Fund Iowa Code section 15.311,
  et seq.
• Ability to provide a group exemption for tax
  purposes to affiliated organizations

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School Foundations

• Generally set up as nonprofit corporations under
  RINCA
• 501(c)(3) Tax-Exempt Status Public Charity
• For IRS purposes, can be viewed as a supporting
  organization
• Supporting organization must be organized and
  operated exclusively for benefit of, to perform
  functions of, or to carry out purposes of one or
  more specified qualified supported organizations

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School Foundations (contd.)

• Purposes and Powers
• Established to support a school or school
  district
• Powers generally allow for
• Aid in fulfillment of teaching and service
  functions of school(s)
• Make grants and loans of property
• Solicit, accept, administer, and disburse gifts,
  grants and bequests or hold in trust
• Receive government grants
• Make disbursements to school(s)

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Collaboration Issues

• Parties Involved in Collaboration
• Community Foundation
• School School District Foundation?
• Schools or School Districts?
• Community Affiliate Organization?
• Donors?

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Collaboration Issues (contd.)

• Services Agreement Between Community Foundation
  and School Foundation
• Administrative services provided by Community
  Foundation
• Staff support
• Accounting services
• Investment services
• Issues
• Fees
• Restrictions on investments for gifts provided
  directly to schools
• Donor lists
• UBIT

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Collaboration Issues (contd.)

• Donor Advised Funds
• Community Foundation may receive gifts in form of
  donor advised funds
• Allows donor to remain involved in gift without
  assuming administrative and financial burdens of
  a private or public foundation
• Donor advised funds are part of the legislative
  recommendations of the Panel on the Nonprofit
  Sector

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Collaboration Issues (contd.)

• Affiliation Agreement Between Qualified Community
  Foundation and Community Affiliate Organization
• Qualified Community Foundation provides
• Staff support
• Accounting services
• Investment services

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Collaboration Issues (contd.)

• Affiliation Agreement (contd.)
• Qualified Community Foundation (contd.)
• Issues
• Fees
• Portability
• Automatic or discretionary on part of Qualified
  Community Foundation
• Fees
• Notice
• Donor list
• UBIT

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Collaboration Issues (contd.)

• Fiduciary Duties of School Foundation Officers
  and Directors Issues
• Officers and Directors Have Fiduciary Duties To
  Nonprofit
• Duties Include
• Duty of Care
• Duty of Loyalty
• Duty of Obedience

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Collaboration Issues (contd.)

• Duty of Care
• RINCA requires each member of the board of
  directors, when discharging the duties of a
  director, to . . . act . . . in good faith
  and in a manner the director reasonably
  believes to be in the best interest of the
  corporation.

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Collaboration Issues (contd.)

• Duty of Care (contd.)
• RINCA explicitly recognizes that as members of
  the board and committees of the board directors
  have both a decision-making function and an
  oversight function
• Attending meetings regularly, entering
  discussions
• Reading minutes, learning about entitys
  programs.
• Oversight of finances
• Inquire as to any questionable activity

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Collaboration Issues (contd.)

• UMIFA requires Board to consider various factors
  before making investment decision
• Long-term and short-term needs
• Present and anticipated financial requirements
• Expected total return
• Price level trends
• General economic conditions
• Board may delegate day to day investment
  decisions to investment advisor.

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Collaboration Issues (contd.)

• UMIFA (contd)
• Board is required to regularly review portfolio.
• Advisor needs to be given investment policy with
  guidelines.

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Collaboration Issues (contd.)

• Duty of Loyalty
• A director is required to act in the interest of
  the corporation and not in his or her own
  interest or the interest of another person or
  entity.
• Conflict of Interest Transactions
• Transactions in which director has personal
  financial interest
• Written conflicts of interest policy
• Full disclosure of interest in transaction to
  Board
• Not participate in voting on transaction
• Corporate Opportunity

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Collaboration Issues (contd.)

• Duty of Obedience
• Nonprofit directors and officers have been
  determined to owe a duty to carry out the purpose
  of the organization
• Includes compliance with federal and state laws
  applicable to nonprofits
• Complying with the terms of the articles and
  bylaws

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Collaboration Issues (contd.)

• Protections for Directors and Officers
• Liability Shield Iowa Code section 504.901
• Business Judgment Rule Iowa Code section
  504.832
• Indemnification Iowa Code sections 504.202
  504.831 et seq.
• Liability Shield for Volunteers of Unincorporated
  Associations Iowa Code section 613.19
• Federal Volunteer Protection Act
• Directors and Officers Coverage

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RESOURCES

• Larned A. Waterman Iowa Nonprofit Resource Center
• http//nonprofit.law.uiowa.edu/
• Iowa Secretary of State
• www.sos.state.ia.us/business/nonprofits/index.html
  
• Community Vitality Center
• http//www.cvcia.org/
• Panel on the Nonprofit Sector
• www.nonprofitpanel.org/

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• Thank You